Dispatches from Venezuela: A Bag Full of Bolivars and a Very Long Speech
From the notebook of Marketplace correspondent Scott Tong, on the ground in Venezuela.
Upon arrival in Caracas, I gave my translator $100 to exchange into local bills, or bolivars. My bolivars came back the next day, in a plastic bag that was rather full. This is what hyper-inflation looks like. Under the official exchange rate, one dollar buys about six bolivars (actually the government just raised it to 10). But in the black (a.k.a. real) market, I traded one U.S. dollar for 800 bolivars. And I’m pretty sure that’s the rip-off-the-American rate; a widely cited website Dolar Today suggests the rate is closer to 1:1000.
Upon receiving my bag of cash, I made a quick video to talk myself through how the various exchange rates work. Or how I think they work.
Once I started to figure things out, the government proceeded to move the Bolivarian goalposts. Earlier this month, President Nicolas Maduro addressed the country — in a wandering speech that went on for five hours — and changed the official exchange rate. Now one dollar buys about 10 bolivars instead of six.
As best I can tell, this change means nothing to most people on the street. Why? The official rate is only available to a select few; only importers of essential goods like medicine are allowed this rate. It amounts to buying dollars for cheap. For just about everyone else, the black market exchange applies and it costs 800–1000 bolivars to buy one dollar.
Here’s why it matters: just about everything you get in Venezuela with the exception of crude oil — and avocados, it appears — is imported. That is, food and basic goods are bought from suppliers outside the country, with dollars. Think of one U.S. dollar as one meal in Venezuela. When it becomes more expensive to buy a dollar — the going price is now around 1000 bolivars — each meal gets more expensive. If you’re a low-end worker, a whole month’s salary (say 10,000 bolivars) now gets you just ten dollars, or ten meals. This is how worthless the currency has become, and what inflation looks like here.
In a future post, I’ll try to illustrate the price effect with the yummy lunch I had the other day: a hot dog monstrosity known as a Pepito. Pepito-nomics, coming next.